From Debit Cards to American Express Platinum

Debit card usage has risen dramatically in the United States in the last several years.  Today, the majority of POS retail transactions are debit card swipes.  Millions of people are cutting up their credit cards and relying on debit cards.

We were on the debit card train too.  For the last several years, my wife and I haven’t been using credit cards; we’ve been religiously using debit cards, just as Dave Ramsey recommends.

We Can Cut You Off for No Reason

It wasn’t until my debit card was rejected at Target without explanation that I had to question the wisdom of my choices.  Luckily, I had enough cash to cover the transaction, but I was still embarrassed and as we ambled to our cars through the parking lot, my thoughts turned sinister, and I quietly wondered if a criminal had liquidated my bank account. 

After finally getting through to the bank, it was explained that it was actually my fault (WTF?) – I didn’t inform the bank I was going to travel to Houston.  I asked them why I needed to get permission to travel to Houston to access my money.  The representative cleared the “security flag,” told me the card would be active within the next 48 hours, and then admonished me for not telling them of my travel plans (and that it would probably happen again if I didn’t).

That was the exact moment that I discovered that Dave Ramsey isn’t always right.

No Credit Building Benefit

Personally, I don’t pay much attention to my credit score.  I’d rather have money in the bank than a stack of “good” debt.  That said, credit scores rule our lives, and debit cards are not credit products and therefore are not reported to the credit reporting agencies.

Fewer Protections for Charge Backs and Disputes

Dave Ramsey points out that if you have a debit card from MasterCard or Visa, you are covered by the same policies about unauthorized charges that credit cards have.  And this is true, but only to a point. 

With debit cards, if the card has a Visa logo, you are protected above and beyond what the Federal Reserve’s rules require.  However, there is a different level of pain associated with getting the charges removed on a credit card than on your checking account, which most people don’t realize (and Dave Ramsey doesn’t tell people). 

On the credit card, you call them up and you have the option of just not paying.  It’s the bank’s money.  You can still make your mortgage payment, your car payment, etc.  The level of pain rises to the level of annoyance mixed with indignant anger.  You secretly hope the credit card company hunts these criminals down and throw them in jail (but they won’t).  You get a new credit card in the mail and life continues.

However, with the debit card, your money is effectively gone.  You have an outstanding check to the Mortgage company?  Bounced.  Want to buy some groceries?  Sorry, you don’t have cash.  The level of pain rises to an entirely new level.  Your wife can’t buy groceries or put gas in the car.  You call the bank, beg them to return your money, and they investigate… and you hope they credit the charges back quickly (they have three days while the tsunami of overdrafts approach). 

On that note, have you ever tried to argue with a bank representative to get them to refund a overdraft charge, even if it was due to their error?  I have, and it is like trying to get a homeless person to give you money.  It is very difficult to do, even if you are very persuasive and persistent.  When US Bank placed a double hold on my paycheck deposited at their ATM (word the wise: never, ever use an ATM to deposit your paycheck).  They first turned me down several times to get the overdrafts reversed (and then had the nerve to try to talk me into a U.S. Bank credit card).

I have personally run the gantlet to get a charge reversed on my debit card.  I purchased an android tablet that was never shipped to me via one of Woot’s deal sites.  It took a total of two months, several faxes and nearly a dozen phone calls to the bank.  The bank credited the purchase back to me, then automatically reversed it by deciding in the merchant’s favor, even though I had a shipping notice that clearly showed it never shipped.  What an incredible hassle.

More Problematic

When you swipe your debit card at a gas station, car rental counter, hotel, or restaurant, the business first pings your credit card (or debit card) for more than you charge.  This is called a hold.  This hold, which usually only lasts a few days until the charges are settled, locks up your ability to use your money in your checking account.  Holds for car rentals and hotels can be significant, in the hundreds of dollars. 

The money isn’t usable until the hotel or rental car transactions fully clear, which is the length of your stay plus a few more days.

Enter American Express

So, given that I’m not satisfied with my Bank, I decided to look for a credit or charge card where we could put all of our spending.  This would isolate us from our bank, giving us the ability to switch banks on a whim, without regard to outstanding charges or automatic debits.

I decided against getting an airline mileage card.  The airlines are devaluing miles and changing the terms of their programs so fast it is difficult to keep up.  American announced that as of December 1st that only Butt-In-Seat (BIS) or miles earned from two specific cards will count towards million mile status levels.

I started looking at American Express charge cards and discovered that there are some pretty good signup bonuses right now.  So I signed up for the American Express Platinum.

Now, all of my business and personal spending is on the the American express cards, which simplifies reconciling the bank accounts (and I get MR points in addition to the bonuses).

With the platinum card, you get airline lounge access and up to $200 per calendar year of incidental airline fees (baggage, ticketing fees, etc.) are automatically credited back to you.  This includes gift cards purchase directly from American Airlines.  I’ve also enrolled in the U.S. Customs Global Entry/trusted traveler program where I will get expedited entry into the U.S., and won’t have to take my shoes and belt off at those god forsaken TSA check points (the $100 fee is rebated back to you).  That effectively knocks the fee from $450 down to $150, not including the 25k points.

When the annual fee comes due, I will probably downgrade to another card, but for the mean time, I’m immensely happy with American Express. 

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